Property market waits for frozen credit to thaw
05-06-2012
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Settling bad debts
Tackling capital depletion and frozen credit is a critical issue at present, said Le Xuan Nghia, former vice chairman of the National Financial Supervision Committee, at the seminar called “Reviving real estate resources” held by Lao Dong newspaper last Thursday in HCMC.
He said the Government had never paid so much attention to the property market as they do now. If the Government’s solutions show effect, the realty market will gradually recover in line with the economy.
Like other sectors, the property market is waiting for the bailout package for enterprises. Particularly, property is no longer classified as a market where loans are discouraged and real estate firms will enjoy one-year extensions of value-added tax, corporate income tax, land rent and land use fee.
However, even when debt repayment is extended and lending rates are lowered, nothing will be solved if enterprises are unable to take out new loans. As such, settling bad debts is an important issue now, Nghia underscored.
The economic expert described bad debts as a car that breaks down in the middle of the road and disrupts traffic flow. Therefore, that car must be pushed off the road, he stressed.
The Government estimated some VND120 trillion, or US$6 billion, would be needed to remove bad debts from balance sheets of banks, and then enterprises would be qualified to take out new loans.
According to Deputy Minister of Construction Nguyen Tran Nam, apart from the government bonds, accelerating disbursement for public investment will also promote the property market.
Saving themselves
However, Nam said property companies must take measures to overcome their own difficulties. In addition, they have to look at the market to develop projects in accordance with their capabilities.
At a seminar on finding a way out for property firms organized by the HCMC Real Estate Association (HoREA) last week, participants shared the view that enterprises must save themselves, even take the initiative to leave the market before their business get worse.
Vu Dinh Anh, former deputy director of the Market and Price Research Institute under the Ministry of Finance, said Vietnam’s economy this year might repeat the same scenario in 2009, when it was greatly affected by the global financial crisis. Therefore, real estate enterprises cannot avoid the impacts of the macro-economy, as the property market cannot prosper when economic growth goes down.
Property credit makes up 10% of the total credit, or VND280 trillion. More notably, some 60% of the total credit is mortgaged by property or related to property, said Anh.
The problem of real estate companies is currently bank loans and lending rates. However, property developers have to answer what they borrow for, as owners of several projects are unable to sell their products.
Therefore, experts said enterprises should consider adjusting their business strategies in accordance with the current situation.
Poor liquidity is the key problem of the realty market at present, so enterprises are offering discounts to lure customers. For example, Hoang Anh Gia Lai has announced to cut their apartment prices by a half compared to the projects in HCMC’s District 7.
Anh noted enterprises are forced to discount their products, or pull out of the market when there is no chance left for them.
“Don’t be ashamed of your decision to withdraw from the market,” said Anh, adding that many foreign companies had left Vietnam’s market last year due to loss-making businesses. Still, not any property firm is able to withdraw from the market at present.
Do Thi Loan, vice chairwoman cum general secretary of HoREA, said many enterprises are still struggling with their projects, bank debts and unsold products, and thus it is impossible for them to escape from the market.
